Treasury market participants passed another quiet Monday yesterday, with little activity and only minor price changes.

The market did manage to generate a slightly firmer tone than last week, however, with the long bond up 1/8 to yield 8.21%.

Traders said the better tone of the long end might reflect short-covering ahead of tomorrow's retail sales figures for July. The number is expected to show a 0.3% to 0.4% increase, according to a survey of economists. That compares to a 0.2% decline reported for June.

Jan Hurley, a senior market analyst at Chase Securities said the better feel to the long end yesterday might also be attributable to the market getting over a case of "indigestion" from last week's massive refunding. With supply concerns behind them, traders are starting to focus on the encouraging inflation news offered by Friday's 0.2% drop in the producer price index, and the good news expected from this week's other economic indicators.

The consumer price index set for release tomorrow, for example, will be another important indication of where inflation might be headed, Ms. Hurley said. "To the extend that the CPI is well-behaved, we'll probably see some improvement at the long-end," she said.

The retail sales figure, meanwhile, will provide a glimpse of the health of the consumer side of the economy.

Given recent indications that inflation is under control, the market is expecting another Fed ease, probably next month.

"The probability is quite high of another ease once if not twice by the end of the year," Ms. Hurley said. She said it was more difficult to predict when the ease might come, especially in light of the fact that the Fed "blindsided" the market last week when it eased unexpectedly.

Market participants say there is a remote chance the Fed will take action immediately following next week's meeting of the Federal Open Market Committee. But they say it is more likely that such a move would have to wait until early September, when the August employment report is due for release.

Yesterday's only economic number, June housing completions, was ignored by the market. The rate jumped 1.4% for the month, compared to a 1.8% decline in May. But the indicator comes too late to have much market impact, and its relevance is questionable anyway, according to Ms. Hurley.

"I'm more interested in when the shovel goes into the ground than when the houses are completed," she said.

In other news yesterday, the weekly bill auctions went extremely well, with the 3-month average at 5.30% and the 6-month at 5.39%. Noncompetitive bids were said to be strong for both issues.

The September bond future contract closed 5/16 higher yesterday, at 96 12/32.

In the cash market, the when-issued 30-year 8 1/2% bond was 1/8 higher, at 98 30/32-99 2/32, to yield 8.21%.

Treasury Market Yields

Prev. Prev.

Monday Week Month

3-Month Bill 5.44 5.65 5.73

6-Month Bill 5.60 5.81 5.94

1-Year Bill 5.76 6.02 6.26

2-Year Note 6.46 6.66 6.87

3-Year Note 6.84 6.95 7.29

4-Year Note 6.98 7.09 7.44

5-Year Note 7.46 7.59 7.90

7-Year Note 7.77 7.86 8.13

10-Year Note 7.94 8.01 8.26

20-Year Bond 8.19 8.20 8.43

30-Year Bond 8.21 8.21 8.44

Source: Cantor, Fitzgerald/Telerate

In other when-issued trading, the 7 7/8% 10-year note rose 5/32, to 99 13/32-99 17/32, to yield 7.94%, and the three-year 6 7/8% note was unchanged at 100 1/32-100 3/32, to yield 6.84%.

Rates on Treasury bills were mixed, with the three-month bill down one basis point at 5.31%, the six-month bill up one basis point at 5.39%, and the year bill unchanged at 5.46%.

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